Consulting engineers Connell Wagner have lost their contract on Fortescue Metals Group's $3.7 billion Pilbara iron ore project after a dispute over fees.
Consulting engineers Connell Wagner have lost their contract on Fortescue Metals Group's $3.7 billion Pilbara iron ore project after a dispute over fees.
Connell Wagner had the unusal role of independent engineer and it was charged with protecting the interests of note holders that had loaned FMG $2.6 billion.
Specifically, Connell Wagner's task was to audit expenditure on the project, which like many big projects is facing cost pressures.
FMG executive director Graeme Rowley said the fees being charged by Connell Wagner were "above what we expected" and therefore it had agreed to step down from the role.
The Bank of New York, in its capacity as trustee for the note holders, appointed international firm Behre Dolbear as the replacement independent engineer.
Mr Rowley said the appointment of a new independent engineer did not reflect on the progress being made on the project, and added that work was continuing according to plan.
He added that WorleyParsons role as the main engineering contractor was unaffected.
The forecast capital costs for FMG's project are $2.2 billion, which includes a contingency of $198 million.
FMG has previously annonced that work on the project has been affected by delays in obtaining regulatory and environmental approvals.
It has responded to the delays by increasing the number of 'work faces' on its rail line and moving to double shifts in certain areas.
The extra cost of the revised program was estimated at $15 million and was designed to enable the company to meet its target of commissioning the project in the first quarter of 2008.
A copy of today's FMG annoncement is pasted below:
FMG Finance Pty Ltd (being a wholly owned subsidiary of Fortescue Metals Group Ltd) advises of the appointment of a new Independent Engineer pursuant to the secured notes that are listed on the Singapore Stock Exchange "SGX".
By mutual agreement Connell Wagner Pty Ltd has stepped down from the role and Bank of New York, in its capacity as Trustee for the note holders, has appointed Behre Dolbear Australia Pty Limited as the replacement.
Behre Dolbear has extensive experience across the international mining and engineering industry and has provided Independent Engineer services on many large projects.
The change of Independent Engineer followed a dispute about quantum of fees and in the interests of a speedy resolution the Trustee Bank of New York, in consultation with both FMG Finance and Connell Wagner, facilitated the mutually agreed termination of the original appointment.
